'Epic Debate' Led to Heinz Tuna Plan

By ANTHONY RAMIREZ

Published: April 16, 1990

Until last week, it was easy to describe relations between the H. J. Heinz Company, the world's largest tuna canner, and environmental groups trying to save dolphins tangled in tuna nets. ''We were the bitterest of enemies,'' one defender of the dolphins said.

But on Thursday, Heinz's Star-Kist Seafood Company said it would no longer buy tuna trapped by nets that kill dolphins. Within hours, Star-Kist's leading competitors, the Van Camp Seafood Company and Bumble Bee Seafoods Inc., announced similar policies of buying tuna from fisherman using ''dolphin safe'' methods. These moves will affect nearly 70 percent of the canned tuna sold in the United States.

Anthony J. F. O'Reilly, the chairman of Heinz, attributed his company's decision to both external influences - lobbying by environmentalists and a consumer boycott of tuna -and an internal corporate debate. ''There was an epic debate, almost theological in tone'' about whether to adopt the dolphin-safe policy, Mr. O'Reilly said in a telephone interview.

The consumer boycott, which included a growing number of schoolchildren, seemed to argue for a dolphin-safe policy.

But Star-Kist's internal marketing surveys showed a risk: only half of all consumers were willing to pay higher prices for dolphin-safe tuna. The other half presumably wanted the least expensive tuna.

The furor over dolphins arises because the playful and intelligent marine mammals swim above the delicately flavored, much-prized yellowfin tuna. When tuna fishermen set their nets on the fish, they also drag in the air-breathing dolphins, who often drown before the nets are hauled in.

Star-Kist officials say that under the company's new policy, tuna prices may rise 2 cents to 10 cents a can because of higher freight costs. Star-Kist is likely to buy more tuna from those who fish farther from the United States, where dolphins do not swim with tuna.

Still, ''the negative publicity of doing nothing would probably have harmed Heinz,'' said Pavlos M. Alexandrakis, an analyst with the Argus Research Corporation. ''Heinz would have looked like it was not being run by socially conscious people.''

The history of Heinz's decision is also a story of an unlikely network of people. There is the biologist whose film of dolphins drowning in tuna nets prompted a former fashion model to protest their deaths. There is her husband, a record company executive, who lobbied Mr. O'Reilly. And there is, above all, Mr. O'Reilly himself -chief executive of Heinz since 1979. A former rugby star, he possessed the media savvy that comes from being Ireland's leading press baron, controlling The Irish Independent.

Over a decade, the Pittsburgh-based company has nearly quadrupled profits and more than doubled sales. In the year ended April 30, 1989, Heinz earned $440 million on sales of more than $5.8 billion.

In the fiscal year ending this month, Heinz's Star-Kist tuna will post pretax income of $160 million, according to William Leach, an analyst with Donaldson, Lufkin & Jenrette. That is up more than 10 percent from $145 million a year earlier.

Challenge of Growth

But to keep Star-Kist profits growing is a challenge, said Keith A. Hauge, president of the Star-Kist subsidiary, which is based in Long Beach, Calif. Despite Star-Kist's well-known commercials with ''Charlie the Tuna,'' consumer's brand loyalty is low. Also, preparing tuna for canning, a process that is mostly done by hand, is so expensive that Heinz can do little to fatten margins with productivity gains.

That leaves the brute force of sales volume. On the supermarket shelf, canned tuna retails for about 89 cents for a 6.5-ounce can of chunk light tuna, but retailers often mark it down to 69 cents to entice customers into the store. The practice means that profit margins are so low that for anyone - fishermen, canners, or retailers - to make money, the volume of tuna caught and sold must be high.

Fishermen, who now receive about 44 cents a pound for tuna, have long used high-volume methods of harvesting the fish. In the 1960's they began to use huge circular nets, which also ensnared dolphins.

In 1972, a Federal law, the Marine Mammal Protection Act, set a ceiling of 20,500 dolphins that can be killed each year by American tuna fishermen. Federal observers are posted on the 65 American vessels that catch nearly all of the tuna sold in the United States. But environmentalists assert that enforcement has been lax, especially on foreign boats, 30 percent of which are also supposed to be monitored under the law.

Effect of Consumer Boycotts

Consumer boycotts have rarely hurt a target company's sales. Star-Kist's revenue and profit actually grew during the two years of the boycott called by the Earth Island Institute, an environmentalist organization in San Francisco, and other groups.

For its part, Heinz believed that it was not effectively communicating its commitment to protecting the dolphins. Since 1970, officals said, Star-Kist had been helping reduce the number of dolphins killed by buying only from boats that used special nets and procedures that allowed more dolphins to escape.